The Government’s Bank

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Abstract This chapter explores the emergence of ‘credit policy’, which more or less completely replaced ‘monetary policy’ as a key concept among experts and politicians. The term implied a shift in focus from aggregates that had previously been at the core of central bank activity—money, liquidity, and interest rates, as a means to control inflation and output—to loans facilitating specific types of economic activities. Credit policy mainly became a process for regulating aggregate lending and allocating the credit to various sectors of the economy. When starting to conduct credit policies, the authorities needed both a formal and informal system for regulating and allocation of loans, and some principles for prioritizing between potential credit customers. Both challenges came to engage government ministries, while Norges Bank sought to find a role in the implementation and management of the emerging system. In practice, Norges Bank became the government’s bank, as part of its key policy apparatus. The central bank governor, Gunnar Jahn, wanted another policy and a freer role but adapted to the new reality that was forced upon Norges Bank. When he stepped down in 1954, Norges Bank was among the least influential of the central banks in western Europe.